Friday, December 18, 2009

A lesson for employers: AT&T sued for alleged violations of the FLSA

AT&T and two of its subsidiaries have been hit by a class action lawsuit brought by approximately 5,000 of its employees who allege that AT&T violated the overtime pay requirements of the federal Fair Labor Standards Act (the “FLSA”). The employees are claiming an estimate $1 Billon in unpaid overtime and damages, stemming from a company-wide policy in which AT&T classified first-level managers as exempt from overtime pay requirements.

This case serves as an object lesson for employers of all sizes of the perils that can lie in the decisions surrounding how to compensate employees. Federal labor laws are complex and fraught with subtle distinctions and grey areas which can lead even companies with sophisticated HR departments and legal counsel into uncertain and perilous ground. The danger for many companies, particularly either smaller or struggling business, is that violations of the FSLA carries with it not only a requirement that the employer pay out any unpaid overtime pay, but a violating company is also subject to additional damages equal to the unpaid overtime, as well as the attorneys’ fees incurred by the employees in recovering the unpaid overtime.  This sort of “double damages” provision can be ruinous for business that already struggle with costs of doing business in a difficult economy.

Further complicating matters is the fact that, unlike many other federal employment laws, the FLSA applies to business of all sizes, ranging from companies with a single employee to ones with tens of thousands of employees.

Cases such as the AT&T case are good example of why it is vital for business, regardless of size or industry, understand how federal and state labor laws apply to it, and likewise ensure that their policies and practices are fully compliant. The cost of not doing so makes the relatively minimal expense of such an “ounce of prevention” far more attractive than either the “pound of cure” or, even worse, the cost of an adverse judgment.

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